For all the losses facing Europeans this year, investors from the region who bought US stocks as the euro weakened are getting the best returns in a decade.
When translated to euros, the Standard & Poor’s 500 Index rose 23 per cent this year, the most since the currency was formed in 1999 and almost double the 13 per cent gain for Americans, according to data compiled by Bloomberg. Buying the Nikkei 225 stock average in Tokyo produced a 20 per cent increase for Europeans, compared to a 2.5 per cent loss when priced in yen, the data show.
Record budget deficits and bailouts of Greece and Ireland sent the European currency down 8.4 per cent in 2010, boosting winnings for anyone converting dollar-denominated investments back into euros. Concern about further declines may spur more overseas investment in 2011, according to Dirk Pattyn at Degroof Fund Management in Brussels, whose US fund gave European investors a 24 per cent return this year.
“The focus is still the debt problem in Europe, and many clients might be looking at the US as a first alternative,” said Pattyn, who held Chevron Corp and Microsoft Corp among $33 billion in investments at his company this year. “It’s been an excellent year for US investors in Europe. You have the currency that added a lot, and also you had the performance of the underlying index.”
Most since 2007
Investors outside the US purchased American stocks at an annual pace of $146 billion in the third quarter, on course for the biggest annual gain since 2007, data from the Federal Reserve show. Europeans bought a net $18.3 billion of US stocks in September, the most since May 2007, just as credit markets started to freeze, the data show. While the benchmark Euro Stoxx 50 Index slipped 3.5 per cent this year till the end of last week, traders in the 16 nations that share the single European currency made an average 29 per cent by investing in 62 non-euro nations tracked by Bloomberg.
The Euro Stoxx 50 slid 1.4 per cent at 8:40 am in London on Monday, while futures on the S&P 500 fell 0.5 per cent.